TOWARD GREATER INEQUALITY

Noam Chomsky

In his column in the New York Times, Anthony Lewis wrote, "Since
World War ll, the world has experienced extraordinary growth."
Meanwhile, at a meeting in Quito, Ecuador, Juan de Dias Parra,
the head of the Latin American Association for Human Rights, said,
"In Latin America today, there are 7 million more hungry
people, 30 million more illiterate people, 10 million more families
without homes, 40 million more unemployed persons than there were
20 years ago. There are 240 million human beings in Latin America
without the necessities of life, and this when the region is richer
and more stable than ever, according to the way the world sees
it." How do you reconcile those two statements?

It just depends on which people you're talking about. The World
Bank came out with a study on Latin America which warned that
Latin America was facing chaos because of the extraordinarily
high level of inequality, which is the highest in the world (and
that's after a period of substantial growth). Even the things
the World Bank cares about are threatened.

The inequality didn't just come from the heavens. There was a
struggle over the course of Latin American development back in
the mid-1940s, when the new world order of that day was being
crafted.

The State Department documents on this are quite interesting.
They said that Latin America was swept by what they called the
"philosophy of the new nationalism," which called for
increasing production for domestic needs and reducing inequality.
The basic principle of this new nationalism was that the people
of the country should be the prime beneficiary of the country's
resources.

The US was sharply opposed to that and came out with an economic
charter for the Americas that called for eliminating economic
nationalism (as it's also called) in all of its forms and insisting
that Latin American development be "complementary" to
US development. That means we'll have the advanced industry and
the technology and the peons in Latin America will produce export
crops and do some simple operations that they can manage. But
they won't develop economically the way we did.

Given the distribution of power, the US of course won. In countries
like Brazil, we just took over-Brazil has been almost completely
directed by American technocrats for about fifty years. Its enormous
resources should make it one of the richest countries in the world,
and it's had one of the highest growth rates. But thanks to our
influence on Brazil's social and economic system, it's ranked
around Albania and Paraguay in quality of life measures, infant
mortality and so on.

It's true, as Lewis says, that there's been very substantial growth
in the world. At the same time, there's incredible poverty and
misery, and that's increased even more.

If you compare the percentage of world income held by the richest
20% and the poorest 20%, the gap has dramatically increased over
the past thirty years. Comparing rich countries to poor countries,
it's about doubled. Comparing rich people to poor people within
countries, it's increased far more and is much sharper. That's
the consequence of a particular kind of growth.

Do you think this trend of growth rates and poverty rates increasing
simultaneously will continue?

Actually, growth rates have been slowing down a lot; in the past
twenty years, they've been roughly half of what they were in the
preceding twenty years. This tendency toward lower growth will
probably continue.

One cause is the enormous increase in the amount of unregulated,
speculative capital. The figures are really astonishing. John
Eatwell, one of the leading specialists in finance at Cambridge
University, estimates that, in 1970, about 90% of international
capital was used for trade and long-term investment-more or less
productive things- and 10% for speculation. By 1990, those figures
had reversed: 90% for speculation and 10% for trade and long-term
investment.

Not only has there been radical change in the nature of unregulated
financial capital, but the quantity has grown enormously. According
to a recent World Bank estimate, $14 trillion is now moving around
the world, about $1 trillion or so of which moves every day.

This huge amount of mostly speculative capital creates pressures
for deflationary policies, because what speculative capital wants
is low growth and low inflation. It's driving much of the world
into a low-growth, low wage equilibrium.

This is a tremendous attack against government efforts to stimulate
the economy. Even in the richer societies, it's very difficult;
in the poorer societies, it's hopeless. What happened with Clinton's
trivial stimulus package was a good indication. It amounted to
nothing-$19 billion, but it was shot down instantly.

In the fall of 1993, the Financial Times [of London] trumpeted,
"the public sector is in retreat every where." Is that
true?

It's largely true, but major parts of the public sector are alive
and well-in particular those parts that cater to the interests
of the wealthy and the powerful. They're declining some what,
but they're still very lively, and they're not going to disappear.

These developments have been going on for about twenty years now.
They had to do with major changes in the international economy
that became more or less crystallized by the early 1970s. For
one thing, US economic hegemony over the world had pretty much
ended by then, and Europe and Japan had reemerged as major economic
and political powers. The costs of the Vietnam War were very significant
for the US economy, and extremely beneficial for its rivals. That
tended to shift the world balance.

In any event, by the early 1970s, the US felt that it could no
longer sustain its traditional role as-essentially-international
banker. (This role was codified in the Bretton Woods agreements
at the end of the Second World War, in which currencies were regulated
relative to one another, and in which the de facto international
currency, the US dollar, was fixed to gold.)

Nixon dismantled the Bretton Woods system around 1970. That led
to tremendous growth in unregulated financial capital. That growth
was rapidly accelerated by the short term rise in the price of
commodities like oil, which led to a huge flow of petrodollars
into the international system. Furthermore, the telecommunications
revolution made it extremely easy to transfer capital-or, rather,
the electronic equivalent of capital-from one place to another.

There's also been a very substantial growth in the internationalization
of production. It's now a lot easier than it was to shift production
to foreign countries-generally highly repressive ones-where you
get much cheaper labor. So a corporate executive who lives in
Greenwich, Connecticut and whose corporate and bank headquarters
are in New York City can have a factory somewhere in the Third
World. The actual banking operations can take place in various
offshore regions where you don't have to worry about supervision-you
can launder drug money or what ever you feel like doing. This
has led to a totally different economy.

With the pressure on corporate profits began in the early 1970s,
a big attack launched on the whole social contract that developed
through a century of struggle and that had been more or less codified
around the end of the Second World War with the New Deal and the
European social welfare states. The attack was led by the US and
England, and by now has reached continental Europe. It's led to
a serious decline in unionization, which carries with it a decline
in wages and other forms of protection, and to a very sharp polarization
of the society, primarily in the US and Britain (but it's spreading).

Driving in to work this morning, I was listening to the BBC [the
British Broadcasting Company, Britain's national broadcasting
service]. They reported a new study that found that children living
in workhouses a century ago had better nutritional standards than
millions of poor children in Britain today.

That's one of the grand achievements of [former British Prime
Minister Margaret] Thatcher's revolution. She succeeded in devastating
British society and destroying large parts of British manufacturing
capacity. England is now one of the poorest countries in Europe-not
much above Spain and Portugal, and well below Italy.

The American achievement was rather similar. We're a much richer,
more powerful country, so it isn't possible to achieve quite what
Britain achieved. But the Reaganites succeeded in driving US wages
down so far that we're now the second lowest of the major industrial
countries, barely above Britain. Labor costs in Italy are about
20% higher than in the US, and in Germany they're maybe 60% higher.

Along with that goes a deterioration of the general social contract
and a breakdown of the kind of public spending that benefits the
less privileged. Needless to say, the kind of public spending
that benefits the wealthy and the privileged-which is enormous-remains
fairly stable.

***

an interview of Noam Chomsky by David Barsamian
from the book Secrets, Lies and Democracy, published in 1994
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